Exam FX chapter 2
Each insurer must maintain a complete file containing every printed, published or prepared advertisement of its policies for a period of at least
3 years
An investor buys a life policy on an elderly person to sell it for a life settlement. This is an example of:
A STOLI Policy
In terms od Social Security, what is the name for the time period after the youngest child of a family turns 16 and before the surviving spouse may start receiving retirement benefits.
Blackout period
What does "Liquidity" refer to in a life insurance policy?
Cash values can be borrowed at any time
A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then
The benefit is received tax free
All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXECPT:
The policy is owned by the company
To which of the following policies would the State regulations on illustrations NOT apply?
An individual variable life policy
Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be finically able to buy the interest of the deceased partner. What type of policy may be used to fund this agreement?
Any form of life insurance
Which of the following is the basic source of information used by the company in the risk selection process?
Application
All of the following are personal uses of life insurance EXEPT:
Buy-sell agreement
How are state Insurance Guaranty Associations funded?
By their members - Authorized insurers
In the event a key employee quits or is terminated, what provision allows the policy owner to transfer coverage to the replacement employee, provided the new employee provides evidence of insurability
Change of Insured
Which of the following is used to compare the cost of one life insurance policy against another in order to guide perspective purchasers to policies that are competitively priced
Cost Comparison methods
A key person insurance policy can pay for which of the following?
Costs of training a replacement
Which of the following is NOT an example of a valid insurable interest?
Debtor in the life of the creditor
When an employer offers to give an employee, a wage increase in the amount of the premium on a new life insurance policy, this is called
Executive bonus
In the Executive Bonus plan, who is the owner of the policy, and who pays the premium?
Executive is the owner, and the executive pays the premium
All of the following are business uses of life insurance Except
Funding against company's general financial loss
Which methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation?
Human life value approach (HLVA)
Which of the following is usually true of a participating life insurance policy?
It pays dividends to policy owners
Attempting to determine how much insurance a family would require based upon their finical objectives is known as
Needs Approach
Which of the following will be included in a policy summary
Premium amounts and surrender values
All of the following are characteristics of group life insurance EXCEPT:
Premiums are determined by the age, sex and occupation of each individual certificate holder
Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?
Premiums are not tax deductible as a business expense
The insurance company underwriter could find information concerning the personal activities and character of an application from which of the following reports?
Producer's Report
Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance?
Replacement rule
An applicant signs an application for a $25,000 life insurance policy, pays the initial premium, and receives a conditional receipt. If the applicant dies the following day, which of the following is TRUE?
The beneficiary will receive the full death benefit if it is determined that the applicant qualified for the policy
Which of the following is an example of liquidity in a life insurance contract?
The cash value available to the policy owner
Who is the owner and who is the beneficiary on a Key Person Life Insurance policy?
The employer is the owner and beneficiary
The mode of premium payment is defined as
The frequency and the amount of the premium payment
Which of the following best defines the "Owner" as it pertains to life settlement contracts
The policy owner of the life insurance policy
Which of the following statements regarding deferred compensation funds is INCORRECT?
They are usually qualified plans
Which of the following is not a characteristic of variable annuities?
They offer guaranteed stock performance
When Y applied for insurance and paid the initial premium on august 14, they were issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the risk or classify it other than as standard. Y was killed in an automobile accident on Aug 22 before the policy was issued. The insurance company will:
Issue the policy anyway and pay the face value to the beneficiary
What are the most common uses of personal life insurance?
Survivor protection, Estate Creation and Conservation, and Cash Accumulation
An insured received a monthly summary for his life insurance policy. He notices that the cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have?
Variable
If an applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about?
Whether an insurable interest exists between the individuals
If an applicant for a life insurance policy is found to be a substandard risk, The insurance company is most likely to
Charge a higher premium
What two parts make up a life insurance application?
General information and medical information
An applicant wants to buy a policy that has a cash value element. Which type should they buy?
Permanent
If someone wants to buy a life insurance policy that will provide lifetime protection against premature death, what type of life insurance policy should that person buy?
Permanent
Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value
Predicted needs of the family after the insured's death
Upon policy delivery, the producer may be required to obtain any of the following EXCEPT
Signed waiver of premium
A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as:
Survivor Protection
What is the purpose of key-Person insurance?
To lessen the risk of financial loss because of the death of a key employee
During replacement of life insurance, a replacing insurer must do which of the following
Obtain a list of all life insurance policies that will be replaced
An insured purchased an individual life insurance policy with a face amount of $15,000. He pays a premium each month. What type of policy is that?
Ordinary Life
When must insurable interest exists in life insurance?
At the time of application
Which of the following statements concerning buy-sell agreements is true?
Buy-sell agreements are normally funded with a life insurance policy
An insured has a life insurance policy with a face amount of $500. He pays a premium each week to the agent who sold him the policy. What kind of policy does the insured have?
Industrial Life
Which of the following entities protects policyowners, insureds, and beneficiaries under insurance contracts when insurers fail to preform contractual obligations due to financial impairment?
Insurance Guaranty Association
All advertisements are the responsibility of the
Insurer
Which of the following would be the best option that would help the surviving spouse of the insured to put her child through daycare after the insured's death?
Life insurance proceeds